October 04, 2018

Central bank wants banks to step up farming loans

February 8— Financial institutions willing to offer loans under the Agricultural Credit Facility (ACF) overseen by Bank of Uganda (BoU), have been advised to create more awareness to spike the interest of farmers who are in most need of this money.

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There are concerns that most of the money is going to commercial farmers, but small scale farmers are frequently unable to provide adequate collateral. 

“As Government we wants to see that small scale farmers are also benefitting from the Agricultural loans scheme because they cannot afford the ordinary credits from commercial banks to finance their Agriculture projects, the only to enable them participate the commercial banks should do more on creating awareness to the general public about the benefits of applying for the Agricultural credit facility,” David Kalyango, the Executive Director Finance at BoU said during mid-week.

He told a news conference limited awareness of the scheme by the prospective  beneficiaries has hindered small scale farmers from applying for loans from the 15 participating financial institutions.

ACF was set up by the government in partnership with several commercial banks, Uganda Development Bank Limited (UDBL), Micro Deposit Taking Institutions (MDIs) and Credit Institutions technically referred to as Participating Financial institutions (PFIs).

The facility is intended to provide medium and long term loans to projects engaged in agriculture and agro-processing on more favorable terms than are usually available from the PFIs. The scheme is administered by the BoU with provision for a maximum grace period of three years and the interest rate to the final borrower being a maximum of 10% per annum.

Kalyango said since the scheme became operational in 2009, total disbursements have amounted to UGX261.33 billion ($73 million). The money has gone to 416 eligible  projects across the country, but there are concerns that the majority of the beneficiaries have been the large commercial farmers.

All ACF loan applications are channeled through the PFIs. The PFIs analyse the loan requests as per their credit policy to ensure that only eligible projects are financed. The PFIs disburse their own funds to eligible projects and subsequently request for re-imbursement of the government contribution from BoU.

The PFIs include dfcu Bank, Stanbic Bank, Centenary Bank, Barclays Bank, Bank of Baroda, Orient Bank, Standard Chartered Bank, Diamond Trust Bank, Kenya Commercial Bank, Uganda Development Bank, Mercantile Credit Bank, Housing Finance Bank, Opportunity Bank, Post Bank, Tropical Bank and Bank of Africa, ABC Capital Bank Limited, Citibank Uganda Limited, Commercial Bank of Africa  Limited,  Ecobank Uganda limited,  Equity Bank Uganda Limited , Finance Trust Bank Limited, Guaranty Trust Bank (Uganda) Limited , United Bank for Africa (Uganda) Limited, Pride microfinance, and Finca Uganda Limited.

Apart from the low awareness about the scheme by the eligible beneficiaries, BoU has also noticed difficulties with lack of collateral by most applicants. This has complicated the processing of the loans especially for small farmers.

However Kalyango assured the general public that bank of Uganda is coming up with some amendments which will soften the process of accessing Agricultural loans.

“In January  2018 Bank of Uganda  endorsed enhancements aimed  at making  the Agricultural Credit Facility  more accessible  to farmers  including those  at small scale holder level ,more sustainable  as a revolving public fund and  more feasible for the participation of financial  Institutions” He promised.

Assessing the performance of the scheme , information available at the central bank indicates during the last quarter of 2017  the ACF total loan portfolio grew by 5.2% or UGX12.92 billion  from UGX248.41 billion to UGX261.33 billion  due to increase  in outreach of the scheme repayment also increased by 125% or UGX3.1 billion

 

 

 

 

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